For the quarter ended June 30, 2014, net income rose by 9.9% to $8.6 million compared to $7.8 million in the second quarter of 2013. Operating income was $15.8 million, up from $14.5 million in the same quarter last year. Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 5.7% to $33.0 million in the second quarter of 2014 from $31.3 million in the second quarter of 2013.

Total revenues were $81.4 million, an increase of 5.1% compared to $77.5 million for the 2013 second quarter. The increase in revenue was largely attributable to growth in subscribers and revenue per subscriber. Total operating expenses were $65.6 million in the second quarter of 2014 compared to $63.0 million in the prior year period. Cost of goods sold increased $1.9 million, including an increase of $0.7 million in cable programming costs, $0.7 million in network maintenance costs and $0.6 million in wireless handset costs. Selling, general and administrative expenses increased $0.3 million. Depreciation and amortization expense increased $0.5 million, primarily due to completion of the Network Vision upgrade project.

President and CEO Christopher E. French commented, "During the second quarter we achieved improved net income largely as a result of revenue and subscriber growth in both the cable and wireless segments. Our regional efforts to promote our upgraded networks and improved service are gaining traction as demonstrated by increases in average revenue per customer. Additionally in the second quarter, we began offering Sprint's Framily service plan and Easy Pay phone financing plan and benefitted from Sprint's national marketing efforts around these programs."

Wireless Segment

Revenues in the wireless segment increased 4.0% to $51.8 million as compared to the second quarter of 2013. Net postpaid service revenues increased $1.2 million as a result of 4.2% growth in average customers and increased data fees. The net service fee to Sprint increased from 12% of net billed revenues to 14% on August 1, 2013, which reduced net postpaid service revenue by $0.9 million. During the second quarter, net prepaid service revenues grew $0.3 million, or 3.1%, due to 3.4% growth in average prepaid subscribers as compared to the same period of 2013.

During the second quarter of 2014, net additions to postpaid subscribers were 2,648, 13.2% higher than net additions in the second quarter of 2013. Net prepaid subscribers declined 361 in the second quarter compared to a decline of 3,032 in the second quarter of 2013. Both decreases are due to lifeline wireless customers not re-qualifying for the programs due to tightened eligibility requirements.

Operating expenses in the Wireless segment increased by $0.5 million in the second quarter of 2014 compared to the second quarter last year. Postpaid handset costs increased $1.0 million due to a high volume of handset upgrades and tablets in 2014 and to higher cost handsets. Prepaid handset subsidies decreased $0.5 million on lower volume of handsets sold.

Second quarter adjusted OIBDA in the wireless segment was $25.8 million, an increase of $1.8 million or 7.5% as compared to the second quarter of 2013.

"Our wireless segment continued to grow with postpaid customer counts increasing and revenue growth in both postpaid and prepaid services offsetting the loss of lower revenue lifeline service customers. We continue to highlight our improved network as part of our local marketing strategies and also saw a positive impact from Sprint's national advertising," stated Mr. French.

Cable Segment

Service revenue in the cable segment increased $1.1 million as a result of a 6.3% increase in average RGUs (the sum of voice, data, and video subscribers), customers selecting higher speed data access packages, and video rate increases in January 2014. Cost of goods and services sold increased by $1.2 million in second quarter 2014 over second quarter 2013, due primarily to increased cable programming costs of $0.7 million as rising rates per subscriber outpaced declining video subscriber counts. Maintenance costs increased $0.3 million related to costs associated with network growth.

Revenue generating units totaled 116,221 at the end of the second quarter of 2014, an increase of 6.1% over the prior year period.

Adjusted OIBDA in the cable segment for second quarter 2014 was $3.9 million, up 20.1% from $3.3 million in the second quarter of 2013.

Mr. French stated, "Performance in our cable segment improved and we saw an increase in revenue generating units (RGUs) as customer demand for high speed internet outweighed the anticipated decrease in video subscribers. We have concentrated our marketing efforts to highlight the speed and strength of our updated network, attracting new cable customers while also expanding the offerings we provide to existing cable customers."

Wireline Segment

Operating income for the wireline segment was $3.8 million as compared to $4.0 million in second quarter 2013. Access lines at June 30, 2014, were 21,842, compared to 22,465 at June 30, 2013.

Adjusted OIBDA for the wireline segment for second quarter 2014 declined to $6.5 million, as compared to $7.0 million in second quarter 2013.

Other Information

Capital expenditures were $15.6 million in the second quarter of 2014, compared to $22.5 million in the comparable 2013 period.

Cash and cash equivalents as of June 30, 2014 were $72.1 million, compared to $38.3 million at December 31, 2013. Total outstanding debt at June 30, 2014 totaled $230.0 million. The Company will begin making quarterly principal payments of $5.75 million on its debt in December 2014. At June 30, 2014, debt as a percent of total assets was 38.1%. The amount available to the Company through its revolver facility was $50 million as of June 30, 2014.

"Our balance sheet is strong and should strengthen further given reduced capital expenditures now that our Network Vision 4G build out and cable system upgrades are complete. We will continue to invest in our networks, services and marketing, and remain on the lookout for new investment opportunities to complement or expand our businesses. We believe the combination of our improved network, competitive service plans and effective regional and national advertising programs, position us well to expand our customer base," Mr. French concluded.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast today, Friday, August 1, 2014, at 8 A.M. Eastern Time.

An audio replay of the call will be available approximately one hour after the call is complete, through August 8, 2014 by calling (855) 859-2056

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States. The Company's services include: wireless voice and data; cable video, internet and voice; fiber network and services; and local and long distance telephone. Shentel is the exclusive personal communications service ("PCS") Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia and West Virginia. For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

Total current liabilities, including current maturities of long-term debt

49,515

43,994

Long-term debt, less current maturities

212,750

224,250

Total other liabilities

89,975

94,447

Total shareholders' equity

251,763

234,315

Total liabilities and shareholders' equity

$ 604,003

$ 597,006

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Operating revenues

$ 81,416

$ 77,454

$ 161,868

$ 153,463

Cost of goods and services

32,403

30,528

64,639

61,229

Selling, general and administrative

16,625

16,355

33,773

32,484

Depreciation and amortization

16,595

16,071

31,983

30,042

Total operating expenses

65,623

62,954

130,395

123,755

Operating income

15,793

14,500

31,473

29,708

Other income (expense):

Interest expense

(2,065)

(2,068)

(4,112)

(4,220)

Gain(loss) on investments, net

114

30

96

178

Non-operating income, net

459

458

1,086

979

Income before taxes

14,301

12,920

28,543

26,645

Income tax expense

5,686

5,078

11,312

10,452

Net income

$ 8,615

$ 7,842

$ 17,231

$ 16,193

Net income per share, basic

$ 0.36

$ 0.33

$ 0.72

$ 0.67

Net income per share, diluted

$ 0.35

$ 0.33

$ 0.71

$ 0.67

Weighted average shares outstanding:

Basic

24,102

23,996

24,080

23,985

Diluted

24,320

24,078

24,271

24,055

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with adjusted OIBDA, which is considered a "non-GAAP financial measure" under SEC rules.

Adjusted OIBDA is defined by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of: certain non-recurring transactions; impairment of assets; gains and losses on asset sales; and share based compensation expense. Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that adjusted OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance. We use adjusted OIBDA as a supplemental performance measure because management believes it facilitates comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made. In the future, management expects that the Company may again report adjusted OIBDA excluding these items and may incur expenses similar to these excluded items. Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes. By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes adjusted OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors. In addition, we believe that adjusted OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. These limitations include the following:

it does not reflect capital expenditures;

many of the assets being depreciated and amortized will have to be replaced in the future and adjusted OIBDA does not reflect cash requirements for such replacements;

it does not reflect costs associated with share-based awards exchanged for employee services;

it does not reflect interest expense necessary to service interest or principal payments on indebtedness;

it does not reflect gains, losses or dividends on investments;

it does not reflect expenses incurred for the payment of income taxes; and

other companies, including companies in our industry, may calculate adjusted OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers adjusted OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The following table shows adjusted OIBDA for the three and six months ended June 30, 2014 and 2013:

Three Months Ended
June 30,

Six Months Ended
June 30,

(in thousands)

2014

2013

2014

2013

Adjusted OIBDA

$ 33,043

$ 31,260

$ 64,773

$ 60,894

The following table reconciles adjusted OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2014 and 2013:

Consolidated:
(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2014

2013

2014

2013

Operating income

$ 15,793

$ 14,500

$ 31,473

$ 29,708

Plus depreciation and amortization

16,595

16,071

31,983

30,042

Plus (gain) loss on asset sales

123

152

(243)

234

Plus share based compensation expense

532

537

1,560

910

Adjusted OIBDA

$ 33,043

$ 31,260

$ 64,773

$ 60,894

The following tables reconcile adjusted OIBDA to operating income by major segment for the three and six months ended June 30, 2014 and 2013:

Wireless Segment:

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Operating income

$ 17,571

$ 16,063

$ 34,364

$ 32,774

Plus depreciation and amortization

8,071

7,781

15,268

13,809

Plus (gain) loss on asset sales

59

11

(293)

100

Plus share based compensation expense

112

152

328

262

Adjusted OIBDA

$ 25,813

$ 24,007

$ 49,667

$ 46,945

Cable Segment:
(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2014

2013

2014

2013

Operating income (loss)

$ (2,085)

$ (2,483)

$(4,045)

$(4,821)

Plus depreciation and amortization

5,766

5,479

11,170

10,684

Plus (gain) loss on asset sales

39

28

16

9

Plus share based compensation expense

196

236

584

398

Adjusted OIBDA

$ 3,916

$ 3,260

$ 7,725

$ 6,270

Wireline Segment:
(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2014

2013

2014

2013

Operating income

$ 3,761

$ 4,000

$ 8,113

$ 7,843

Plus depreciation and amortization

2,653

2,802

5,350

5,532

Plus loss on asset sales

26

113

35

124

Plus share based compensation expense

102

114

280

191

Adjusted OIBDA

$ 6,542

$ 7,029

$ 13,778

$ 13,690

Supplemental Information

Subscriber Statistics

The following tables show selected operating statistics of the Wireless segment as of the dates shown:

June 30,

December 31,

June 30,

December 31,

2014

2013

2013

2012

Retail PCS Subscribers - Postpaid

277,673

273,721

266,297

262,892

Retail PCS Subscribers - Prepaid

138,176

137,047

131,372

128,177

PCS Market POPS (000) (1)

2,406

2,397

2,393

2,390

PCS Covered POPS (000) (1)

2,100

2,067

2,063

2,057

CDMA Base Stations (sites)

528

526

525

516

Towers

154

153

151

150

Non-affiliate cell site leases (2)

195

217

219

216

Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Gross PCS Subscriber Additions - Postpaid

15,898

15,184

31,483

31,088

Net PCS Subscriber Additions - Postpaid

2,648

2,340

3,952

3,405

Gross PCS Subscriber Additions - Prepaid

15,286

18,307

34,458

39,729

Net PCS Subscriber Additions(Losses) - Prepaid

(361)

(3,032)

1,129

3,195

PCS Average Monthly Retail Churn % - Postpaid (3)

1.60%

1.62%

1.67%

1.74%

PCS Average Monthly Retail Churn % - Prepaid (3)

3.78%

5.33%

4.03%

4.62%

1) POPS refers to the estimated population of a given geographic area and is based on information purchased from third party sources. Market POPS are those within a market area which the Company is authorized to serve under its Sprint PCS affiliate agreements, and Covered POPS are those covered by the Company's network.

2) The decrease from December 31, 2013 to June 30, 2014 is a result of expected terminations of Sprint iDEN leases associated with the former Nextel network.

3) PCS Average Monthly Retail Churn is the average of the monthly subscriber turnover, or churn, calculations for the period.

The following table presents selected operating statistics of the Cable segment as of the dates shown:

June 30,

December 31,

June 30,

December 31,

2014

2013

2013

2012

Homes Passed (1)

171,147

170,470

168,523

168,475

Customer Relationships (2)

Video customers

50,159

51,197

51,591

52,676

Non-video customers

19,730

18,341

16,731

15,709

Total customer relationships

69,889

69,538

68,322

68,385

Video

Customers (3)

51,699

53,076

53,395

54,840

Penetration (4)

30.2%

31.1%

31.7%

32.6%

Digital video penetration (5)

63.6%

49.2%

40.2%

39.5%

High-speed Internet

Available Homes (6)

168,923

168,255

166,675

163,273

Customers (3)

48,096

45,776

42,519

40,981

Penetration (4)

28.5%

27.2%

25.5%

25.1%

Voice

Available Homes (6)

166,186

163,282

161,709

154,552

Customers (3)

16,426

14,988

13,576

12,262

Penetration (4)

9.9%

9.2%

8.4%

8.0%

Total Revenue Generating Units (7)

116,221

113,840

109,490

108,083

Total Fiber Miles (8)

70,772

69,715

41,394

39,418

Fiber Route Miles

2,463

2,446

2,234

2,077

1) Homes and businesses are considered passed ("homes passed") if we can connect them to our distribution system without further extending the transmission lines. Homes passed is an estimate based upon the best available information.

2) Customer relationships represent the number of customers who receive at least one of our services.

3) Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer. Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.

4) Penetration is calculated by dividing the number of customers by the number of homes passed or available homes, as appropriate.

5) Digital video penetration is calculated by dividing the number of digital video customers by total video customers. Digital video customers are video customers who receive any level of video service via digital transmission. A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video customer.

6) Homes and businesses are considered available ("available homes") if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.

8) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles. Fiber counts were recalculated after a fiber audit and deployment of enhanced mapping software in the fourth quarter of 2013.

The following table presents selected operating statistics of the Wireline segment as of the dates shown:

June 30,

December 31,

June 30,

December 31,

2014

2013

2013

2012

Telephone Access Lines

21,842

22,106

22,465

22,342

Long Distance Subscribers

9,730

9,851

10,065

10,157

Video Customers

5,904

6,342

6,534

6,719

DSL Subscribers

12,707

12,632

12,621

12,611

Total Fiber Miles (1)

85,348

85,135

84,414

84,107

Fiber Route Miles

1,455

1,452

1,430

1,420

1. Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers. The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business: (1) Wireless, (2) Cable, and (3) Wireline. A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

The Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and Maryland. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

The Wireline segment provides regulated and unregulated voice services, DSL internet access, and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia. The segment also provides video services throughout Shenandoah County, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor, including portions of West Virginia and Maryland.

Three months ended June 30, 2014

Consolidated

(in thousands)

Wireless

Cable

Wireline

Other

Eliminations

Totals

External revenues

Service revenues

$ 47,868

$ 17,416

$ 5,120

$ --

$ --

$ 70,404

Other

2,813

3,388

4,811

--

--

11,012

Total external revenues

50,681

20,804

9,931

--

--

81,416

Internal revenues

1,094

33

5,713

--

(6,840)

--

Total operating revenues

51,775

20,837

15,644

--

(6,840)

81,416

Operating expenses

Costs of goods and services, exclusive of depreciation and amortization shown separately below

18,476

12,421

7,737

--

(6,231)

32,403

Selling, general and administrative, exclusive of depreciation and amortization shown separately below

7,657

4,735

1,493

3,349

(609)

16,625

Depreciation and amortization

8,071

5,766

2,653

105

--

16,595

Total operating expenses

34,204

22,922

11,883

3,454

(6,840)

65,623

Operating income (loss)

17,571

(2,085)

3,761

(3,454)

--

15,793

Three months ended June 30, 2013

Consolidated

(in thousands)

Wireless

Cable

Wireline

Other

Eliminations

Totals

External revenues

Service revenues

$ 46,362

$ 16,325

$ 5,558

$ --

$ --

$ 68,245

Other

2,328

2,357

4,524

--

--

9,209

Total external revenues

48,690

18,682

10,082

--

--

77,454

Internal revenues

1,076

53

5,169

--

(6,298)

--

Total operating revenues

49,766

18,735

15,251

--

(6,298)

77,454

Operating expenses

Costs of goods and services, exclusive of depreciation and amortization shown separately below

17,854

11,239

7,198

--

(5,763)

30,528

Selling, general and administrative, exclusive of depreciation and amortization shown separately below

8,068

4,500

1,251

3,071

(535)

16,355

Depreciation and amortization

7,781

5,479

2,802

9

--

16,071

Total operating expenses

33,703

21,218

11,251

3,080

(6,298)

62,954

Operating income (loss)

16,063

(2,483)

4,000

(3,080)

--

14,500

Six months ended June 30, 2014

Consolidated

(in thousands)

Wireless

Cable

Wireline

Other

Eliminations

Totals

External revenues

Service revenues

$ 95,100

$ 34,840

$ 10,220

$ --

$ --

$ 140,160

Other

5,569

6,418

9,721

--

--

21,708

Total external revenues

100,669

41,258

19,941

--

--

161,868

Internal revenues

2,184

59

11,478

--

(13,721)

--

Total operating revenues

102,853

41,317

31,419

--

(13,721)

161,868

Operating expenses

Costs of goods and services, exclusive of depreciation and amortization shown separately below

37,132

24,811

15,219

--

(12,523)

64,639

Selling, general and administrative, exclusive of depreciation and amortization shown separately below

16,089

9,381

2,737

6,764

(1,198)

33,773

Depreciation and amortization

15,268

11,170

5,350

195

--

31,983

Total operating expenses

68,489

45,362

23,306

6,959

(13,721)

130,395

Operating income (loss)

34,364

(4,045)

8,113

(6,959)

--

31,473

Six months ended June 30, 2013

Consolidated

(in thousands)

Wireless

Cable

Wireline

Other

Eliminations

Totals

External revenues

Service revenues

$ 90,427

$ 32,487

$ 11,021

$ --

$ --

$ 133,935

Other

5,347

4,659

9,522

--

--

19,528

Total external revenues

95,774

37,146

20,543

--

--

153,463

Internal revenues

2,149

102

9,808

--

(12,059)

--

Total operating revenues

97,923

37,248

30,351

--

(12,059)

153,463

Operating expenses

Costs of goods and services, exclusive of depreciation and amortization shown separately below

35,385

22,461

14,364

--

(10,981)

61,229

Selling, general and administrative, exclusive of depreciation and amortization shown separately below

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